Online, kiosk DVD rentals steal show in tough times

Last year, online rental service Netflix and Redbox accounted for nearly all increases in the DVD rental business.

In an economy that can’t seem to get back on its feet, value-priced home entertainment is a big hit with consumers. While DVD rental spending was down nearly 5% in the first half of 2010, according to Rentrak’s Home Video Essentials, online and kiosk rentals have remained healthy.

DVD kiosk rentals continue to grab a bigger share of the video market pie. “Kiosk rentals are just soaring,” said Jack Plunkett, president of Plunkett Research. “It’s clearly a very powerful trend that’s all about price, convenience, speed and location.”

Kiosks are attractive to drug chains and supermarkets because they allow retailers to give shoppers every possible convenience in a highly competitive marketplace. It also doesn’t hurt that they pocket some additional revenue from the kiosk companies.

Redbox Automated Retail has become a considerable force in the market. In September, the company hit the one-billionth DVD rental mark, and the company estimated that its kiosks command a 25% share of all DVD rentals.

The company’s main competitor, Blockbuster, continues to shutter stores and concentrate on the kiosk market, but the industry experts said the company is struggling to play catch-up with a more entrenched Redbox.

Last year, online rental service Netflix and Redbox accounted for nearly all increases in the DVD rental business.

In August, CVS began installing Redbox video rental kiosks in its stores. The rollout will start with kiosks installed in 700 CVS and Longs locations by the end of 2010. The chain should have kiosks installed chainwide by the end of 2011.

The agreement between Redbox and CVS marks the first time CVS has offered a DVD rental service. The partnership also significantly expanded Redbox’s presence in the drug channel, where it has been making inroads.

Also attractive to retailers are the promotional opportunities the presence of a kiosk can offer. In September, Redbox teamed up with Pepsi and Walgreens on a promotion offering consumers a free one-night Redbox rental with the purchase of two Pepsi 2-liter beverages or two free one-night Redbox rentals with the purchase of four Pepsi 2-liter beverages.

2009 rental turns

DISTRIBUTION CHANNEL*

%OF MARKET SHARE

Kiosk

20.5%

In-store

42.6

Subscriptions

36.9

*United States only Source: The NPD Group

Even with downloads becoming more popular, industry experts said there’s more upside to come. “There’s room for considerable future growth from kiosks,” said Plunkett, who estimated that kiosks average 50 rentals a day. “Retailers like the kiosks because they represent found money, and they can spark repeat visits.”